In this podcast episode, Jeff and Rich discuss strategies for maximizing salary for new graduates. They consider the balance of immediate versus long-term income, risk versus reward, career sector choice, location, and the potential of salary negotiation. The hosts emphasize the importance of evaluating personal factors, industry risks, and trends when choosing a career path.

Look, I think, I was looking at the page views on our articles

earlier and I think six of the top 10 most viewed articles around salary.

So I think that says anything you need to know certainly don't about

students and how interested they are in knowing what they're worth, let's say.

So I thought having a chat about how to maximize your salary is a

really good topic to kick off on.

Should we jump straight in?

Rich?

was great.

Awesome.

The first one for me is think carefully about the timeframe

over which you wanna maximize your salary, because there's, there's

different ways you can go about it.

You can play the short game and maximize for immediate salary

outta the gate as a grad.

Or the other end of the spectrum is treat this as a longer game

and think about salary or earning potential over the course of 40

year career or whatever it might be.

And depending on which of the two you are focusing on, it can lead

to slightly different decisions.

I'll give an example.

There's some careers out there, or pathways jobs where you have

quite a high initial salary as a graduate straight outta the gate.

Engineering comes to mind.

Doctors are a good example, very well paid, often towards the top

end of salary rankings by sector.

But less rewarding upside compared to other potential careers.

So you paid right to begin with.

It's unusual to see a pure engineering focused career end up, getting paid

multi-million dollars unless you go down the management path and, leadership

and CEO and that type of stuff.

But pure engineering will be unlikely to see enormous salaries there.

There's always exceptions to the rule.

Of course, if I could to the other end of the spectrum where you

might have a more modest starting salary or even no salary at all.

In the instance of, for example, entrepreneurship and startups, you take

a big haircut there, but if you get it right there's huge upsides and you can

make huge amounts of money, which would make, anything you could possibly earn.

As an engineer or a doctor look like rounding errors.

And then there's, of course, it's not just startup and entrepreneurship

that has a high upside potential.

It's a lot of careers that have that sort of higher risk profile

built into the career progression.

So Rich, you and I used to be in management consulting, management

consulting's known for being quite a brutal pyramided structure.

And you have to fight really hard to get to the top and become

a partner, an equity partner.

But of course, if you get there, chances are you're going to be

earning millions of dollars.

That's right.

They often call them gray head professions . It's competitive to get in.

It's a lot of hours to begin with, and the amount you get rewarded for the

hours you're putting in is, it's really.

It's not a lot in the beginning but they call 'em gray haired professions

because you start getting a reward for it, once you've got gray hair.

And part of the reason for that is that it takes those professions.

Your worth is often built on your experience and it just takes a

long time to get that experience.

If you're gonna be the best lawyer in the room or if you're gonna be the best

strategist in the room, you need to have had a lot of experience behind you.

You're right Jeff.

That's a really good one to think about out at the outset, whether or

not you need to make a lot of money really quickly or you're prepared

to be patient and build a career.

Pros and cons.

If you are gonna pick the ladder and be patient and build a career, you wanna

be sure that you're not kind of person that gets bored with things easily.

If you want to be a lawyer and a top lawyer, you need to be prepared to stick

it out in that profession for 20 years.

Which is no longer the norm.

Most people are changing careers every seven years and jobs much more often.

That way of thinking of sticking a company and sticking with it for decades and

decades is there's no longer that common.

So it's worth thinking about that when you're making these

decisions.

Yeah, absolutely.

It's a good point, Rich.

And that's probably a nice segue into the second point I wanted to talk

about, which is risk versus reward.

They say there's no such thing as asymmetric upside without asymmetric risk.

And you'll have noticed in the types of careers we've talked about already,

consulting where you've got a steep pyramid structure or entrepreneurship

where you've got enormous amount of risk built in whether, the startup might fail.

The more risk you take on the often, or at least the way it should work, the

higher upside potential there should be so very high onto the startup failing.

But if you manage to make it work, then of course, you may have the next

Facebook on your hands, who knows?

I'm using extreme examples here, but the same goes for a lot of careers

if you are willing to take on risk, be it in the form of equity or

performance bonuses or revenue share, or commissions based on your performance.

If the risk sits with you, then often the case is the employer or the people you are

working with will be willing to give up.

More of the share of the pie to compensate you for the fact

that you are taking on risk.

So if we're talking, commissions as a salesperson, a pretty common

split in sales is 60- 40, 60% based salary, 40% commission, and a lot

of sales roles that 40% commission.

This is of your total take home package.

Is uncapped upside in the sense that, if you do unbelievably well,

then you take home a lot of money.

And so it's just a, it's a common example of this risk award structure.

So it's worth really thinking about how much risk you're willing to take on.

There's obviously pros and cons.

A lot of people say when you're younger, that's the time to take on more risk.

But of course there's always downsides and it can pop up in unexpected places.

One thing that comes to mind as an entrepreneur is when it comes time

to borrow money to buy a house.

The banks, when you're trying to get a loan, will not like, will not

give any weight to anything that's basically not a fixed salary that

you've had for multiple years.

And so it can come back to haunt you in other ways.

And these are things that are worth very much thinking through.

Absolutely.

And there's, I suppose you were touching mostly on sharing the financial

risk and reward there, Jeff, but there's also another element of risk that is

often built into salaries, which is look, it could be personal risk or it could be

risk that a really bad outcome happens, and a couple of examples of those kind of

jobs where you get paid really well, but part of that pay is actually compensating

you for taking on a lot of risk.

Or perhaps for the stress is for example, being an air traffic controller

or perhaps being an obstetrician.

So both of those jobs, I'll talk about air traffic control, pays very

well, requires no university degree.

They're hiring right now, actually, Charlie can't get

enough air traffic controllers.

They'll train you, give you everything they need, that you need to do.

And I'm pretty sure the package starts at something north of

a hundred thousand dollars.

But the catch there if there is one, is that it's actually

a kind of a risky job and a very stressful job.

So when you're thinking about that kind of career, you gotta be prepared

to say, am I happy to be responsible for an air disaster or have played a

part in that if that were to happen?

And that's what's happening.

And same with an obstetrician.

They're one of the best paid medical specialists, but it's

because they're taking on a huge amount of risk and they're up for

potentially very large lawsuits every year if something goes wrong.

And so when you're thinking about, if you're looking at a salary

package, it's really important to think about why might that be?

Why might they be paying so much for me to do this role?

What is the catch there?

Yeah, it's a good point, Rich.

I think I read a while ago, the average tenure of a CEO is now four years.

Different type of risk again.

It's a career risk, you get paid the big buck because you don't tend to

last very long in those positions.

And people know that, and therefore you have to compensate them well.

Anyway, so that's worth being really honest with yourself

because it's not nice.

It's all well and good to say.

Yeah, I wanna maximize salary and, yeah, load up on the risk, but

it was gonna keep you up at night sweating bullets over, whether you

can pay the next electricity bill.

You have to think about whether that's worth it or not.

Spot on.

Awesome.

So the next big one here and this kind of comes, becomes apparent when you start to

look at industry and sector level data is as a graduate really picking the sector

you go into can make a big difference.

Now we'll just focus on day one.

We talked about this short versus long term game.

We'll focus on the short term game for now, if you are really focused on

salary as one of the main metrics that you're solving for in a grad job, then

make sure you jump grad australia.com that you download the salary report.

We'll link to it in the description, but what you'll notice straight

away is there's enormous

variation in salaries depending on the sector you pick.

We're talking knocking on the door of 80 grand for some tech actually over

80 grand for mining oil and gas at one end of the spectrum and, in the sort of

fifties and low sixties or the other.

And so this is obviously all take into account.

A lot of the stuff we've already talked about, like risk, supply and demand.

If you're serious about maximizing salary, you can't really look past

starting at this point and thinking: okay, where's the big bucks to begin with?

Same goes for location, and this is one that sector's obvious, right?

There's some sectors that clearly pay more.

But location is something that most people overlook.

Now there's interesting quirks and drivers here around why some

locations are paid better than others.

For example, here in Australia, locations with a higher concentration

of mining jobs, flying, fly out tend to bump up the average.

But generally speaking , here in South Australia where I'm based at

the moment, graduate jobs tend to be materially lower than in Sydney, and

that's just to supply demand thing.

Again, got more headquarters in Sydney, more global corporations,

fiercely competing at the top end of town for talented grads, and

that just plays out in the salary.

Anything you'd add to that Rich?

Look just

on the sectors.

It's really important to get Undergrad Australia and have a look around.

At the moment.

There's a couple of graduate jobs that are offering salaries of $200,000 and

this is just completely unheard of another years, but it's a reality for

students graduating this year and next year particularly with the trading firms.

For students that are out there that wanna make a lot of money quickly, there's

never been a better time to graduate.

So doing your research and thinking about what sector you want to

start in is really important.

Again, coming back to the risk, it's worth thinking about asking that question.

Why might this firm be paying $200,000 for a grad?

What will I be expected to do as a trader here.

And without knowing exactly, I'd probably guess that you'd be expected to start

making a profit for the firm of more than $200,000 in your first year and if that's

not happening consistently year after year, you're gonna be on your way out

or that salary won't be sticking around.

But for those that have got the skills and can do that, then it's

an incredible time to be graduating.

Absolutely.

That's the best in, certainly in my lifetime for graduates.

It's a, it really is a employee's market at the moment.

Lots of firms out there fighting tooth and nail to hire great grads.

Salaries, the thing you are looking to maximize for.

Then you're graduating at the right time.

A nice segue into my final point which is you can negotiate if you have leverage.

Now, big caveat here, and we'll do an entirely different episode on this

because you know how to negotiate the nuances of that so that's effective

and working out whether or not you have leverage, whether or not it's

appropriate to negotiate a salary.

There's a little bit involved with that, but at least for this episode, the point

is you'll never know if you don't ask.

And so if you feel like salary really matters to you and you feel like you're in

a good position, you have a lot to offer.

And what you have to offer is what you know more than what the firm

what the offer on the table is.

Then no harm in nasty.

Jeff, did you think about negotiating when you got your your

offer to join your graduate job?

No,

not once.

I was happy to have an offer, first of all.

And so I figured beggars can't be chooses.

And I was also playing the long game, and I was confident.

We'll talk about this in another episode, but I was confident that I could do

well and demonstrate my value and, come back to the negotiating table in 6 to

12 months once I'd showing what I was capable of and that and, at that point

it's a lot easier to negotiate a salary rather than as an unknown quantity amongst

lots of other grads where they don't really know what type of work gonna do.

Yeah.

How about you?

Oh gosh,

I was so naive at the time.

I don't think it even crossed my mind.

It's yeah, same as you, just happy to have an offer and figured it's

we'll go into this in a later episode, but it wasn't the right time.

Certainly wasn't the, actually, I should tell you one thing I did

negotiate on though is at the firm we joined, there was a signing bonus.

I don't need to remember that, Jeff.

Yeah, I dunno.

And I had this period where I had graduated, but I wasn't gonna start

the job for another 12 months.

But it was actually finishing uni pretty soon.

And so that signing bonus would come in very handy if I could get it now.

It was Time Rich and Cash four, so I did negotiate that early.

Have a few fun.

I had a couple more points to add before we wrap this up, Jeff, another thing to

think about is when you're looking at the variations in different sectors and

particularly different roles in within the same sector .It's important to

understand how many hours you're gonna be expected to work in those roles, and back

solving what the ALI rate is gonna be.

Again, this plays in a little bit to whether you're playing the short game

or the long game, you might see an offer from an investment bank or even

a management consulting company that is north of a hundred thousand dollars.

And you might think that's great, and how could you compare that with an offer for

50 or $60,000 to join an accounting firm?

But the reality is you'll probably be expected to work twice as many hours

at the former rather than the latter.

And that's, and remember with the progressive tax system, the amount

you get taxed on those last dollars is much more than the amount you

get taxed on those first dollars.

So it's worth doing the math and thinking about, is the second 40 hours of my

week really best spent working for this?

Or is it best spent playing sport, doing my own startup, doing a side hustle?

Who knows what it is?

For many people it's totally fine.

They wanna work hard and they want to make an impact.

And that's great, but if that's not for you, be really honest

with yourself about that.

In the beginning.

I was just gonna add Rich, like we, we've made the mistake of,

or at least I've made the mistake of focusing exclusively on salary so far.

But you dead right to bring up the you want to, not just focus on the

output, the salary, but the inputs.

And for a lot of people, work life balance is rightly a focus.

I'm not sure that we ever published should I have to?

Look it up and put it online if we didn't.

But I did do the numbers a while back on comparing effective hourly

rates for different graduate careers.

And I actually compared it to different trades, carpenters

and plumbers and whatnot.

And for most of the entry level graduate salaries on an hourly basis,

they were earning less than a trade.

Now, this was the case a few years ago, so I know cost of trade has gone through the

roof now, probably, almost certainly be the case now, but yeah the work, working

hours do differ significantly between sectors and we do have some data on this.

Banking, investment banking in particular pays very well.

But they're gonna want their pound of flesh in terms of work hours It's

fascinating.

I think this is also a really personal question to answer as well, but for

some people working 16 hours a day on something they love or 20 hours

a day like it's skin off their back.

It's water off their back.

They don't mind because it's what they're doing.

I remember actually, I think Peter, no it's not Peter Teal.

It's It's another guy who said that, look, I can be better at this thing than I do

than anyone else because when I work 18 hours a day, it doesn't feel like work.

It's just what I want.

El Musk doing Musk,

Elon Musk is saying something like, if I work a hundred hour weeks

and everyone else is working 50, then it takes me six months to do whatever else

is, am I getting my wires crossed here?

It's

probably the same point.

Yeah, it's not who I'm thinking of.

It's You mentioned as well the co-founder of Angelist ah, Naval.

Naval.

Naval.

He, yeah.

So he reckons that, if he's an un parried bandage is being able to work

hard on the things that he cares about.

Yeah.

And so the point is, if you love investment banking, you love

consulting and working 16 hours a day without it feeling like work,

that's a great advantage to you.

And therefore this kind of conversation perhaps isn't as relevant.

But if you're...

someone else.

And, working more than eight hours a day is really hard work.

And those extra eight hours you're gonna have to work in a day.

It's gonna be painful.

And so tricking yourself into thinking that, oh, I'll just get

there and it'll all be all right.

Maybe, but maybe not.

It really does come down to what you like as an individual and how you like to work.

Two very good points.

So don't just focus on salary.

Yeah, look, the final point I'd make is around optionality and diversification.

Part of this related to playing the long game that we spoke about earlier.

Some of these gray head professions.

If you go deep on becoming a lawyer, for example, and particularly

if you focus on a specialized part of law, it can be hard to.

It could be hard to unwind these decisions and so your pay might be going up, but

if you're not really enjoying what you're doing, it's hard to jump ship and it's

hard to say let's say you get 10 years down the path of being an IP lawyer and

then you realize, you wake up one day and you realize you don't really like

IP, but you do like the $200,000 salary that you've got gotten yourself used to.

It's hard for you to switch into something else and keep that salary.

Whereas another example, management consulting would say that if you've got

so far down that line and you're getting used to your $200,000 salary, that

actually has a whole lot more optionality.

There's many things you could jump through from there.

But it'll probably allow you to keep your salary and do something different.

I remember clearly I when I was an intern, Jeff, I used to work

at now a non-existent car maker Holden and general Motors Holden.

And back then, Jeff and I are both engineered as well.

I was a kid in a candy shop.

I couldn't have asked for a better job.

I was getting to work with all these cool software and drive cars around

and work with really smart people.

I remember getting to know the two guys around this crash simulation software,

and I thought it was fascinating.

They would build up an entire car using 3D models.

Each component representing the exact material that the real life one was.

And they could run hundreds of crashes per day, changing little things in the

car to try and reduce the loads on the passengers and get a better safety rating.

I just thought that was fascinating and what a cool job.

And so I started speaking to these guys more and more, and they were, I didn't see

it the same way they said, I started out.

I loved it.

I thought it was the best, and I got into it.

And now I'm 20 years into a career.

There's only one company in the country that will hire me because

Holden's the only one still doing this.

I've got no other options.

And as we all know five years later, Holden stopped making cars.

And I don't know what those two guys got up to, but they'd obviously

seen the writing on the wall.

And it's not just that they ran out of opportunities, but they'd also

fallen out of love with what they did.

And when you combine that with, not being able to keep that same

salary and do something else.

It's worth thinking about when you're thinking about what you want to do,

diversification or like the, how broad the skills that you're building can be

used is an important factor to consider.

It's a really good one.

And the context of salary, it's a, it's an elaboration on the point about risk.

More optionality in your career equals lower risk.

The more highly specialized, one firm in the country that could employ you.

You're obviously very valuable to that particular company, but like in

the example of Holden there's more risk built into that career path.

And if things go pair shaped, then it's not so good for your earning potential

unless you're willing to move overseas.

In this instance I actually remember a similar conversation, when I was start, I

was actually, believe it or not, tossing up between going down the government

grad role pathway and consulting.

And I was genuinely on the fence.

The salaries were pretty similar, not that was a big driver for me.

Now, I obviously knew that consulting had a much higher upside potential

than government career paths.

But what got me was one of the partners.

At the time sat me down and said, look, Jeff, if you're not sure, then you really

want to start in consulting because you start at a well regarded consulting

firm and you can make the crossover into the public sector any day of the week.

Anyone will hire you.

He warned me and this is coming from a guy who'd come from the public sector.

Rob Sims actually is now chairman of the ACCC.

He warned me saying the opposite isn't always true.

You start out as a grad in the public sector and it can be very difficult

for you to transition into management consulting, at least in a way where you're

gonna have your experience recognized.

He said, you may come back and start again as a grad, and if you're

comfortable starting at the bottom floor, then that's fine, anyway.

That's just another way of saying that because I wasn't quite sure the

optionality and all the potential career paths that I had as a

graduate who wasn't quite sure what I wanted to do were very appealing.

And of course that also plays out in the earning potential throughout

your career.

That's a good point.

I wouldn't have picked you as a public servant, Jeff.

May think you made the right choice.

Yeah,

I just goes to show you how naive I was.

Awesome.

So that's all, everything on my list.

Rich, did you have any other tips on salary before we wrap up?

Look, I had one more point actually.

It's a very small one, but it's also important to be honest with yourself

about the likelihood of promotion.

We again, go back to some of those professions like being a lawyer

or being a management consultant.

And if you're making your decision based on the assumption that you get through

to partner, it's all about just doing your time until you get to partner.

It's good to think about the probability of that actually happening and being

honest with yourself because it is the only, I don't know what it would've

been for men's consulting, but for every hundred grads that go in, I'd

say probably only two or three of them would go on to, to make partner.

So it's a very small cohort going in and it's much even smaller cohort that make

it to these really high paying positions.

And this happens in different ways, in different sectors.

You gotta factor that into your decision making.

Don't just assume that once you're in, then it's all gonna happen.

In many of these industries, we keep talking about management consulting, but

that's the one we probably know best.

Once you get in, it's starting all over again.

You're back at the ground, you've gotta prove yourself again.

Most of them will have upper out policies, and so unless you back yourself to win in

that competitive environment , it again might not be the right decision for you.

Yeah, totally.

And you can do the maths like you without getting too cute with the numbers.

You can work out, if there's a hundred grads and 10 partners and they're

taking a hundred grads every year and they're appointing one new partner

you can do the maths pretty easily.

Especially with LinkedIn these days, you can get a pretty good profile of a firm.

So you can work out the risk inherent in a career path, and then you can

start to compare it of for terms.

It starts to, when you take into account the one or 10% chance of

becoming a partner, this is assuming of course that you are bang on average.

Then all of a sudden the more you know, secure career paths in inverted

commerce, like pure play engineering or doctors or whatever it might be.

Where less upside but also less risk of your career being derailed totally.

All of a sudden they may start to look a lot more attractive.

Definitely.

Now, before you go on and accuse us all of being too shallow.

This episode was just on salary, but of course, that's not the only factor.

Many reasons as to why you might choose particularly career path.

We'll do another episode on that later, I reckon, Jeff.

But this is just, if you put all those factors aside and you are just thinking

about salary and pay hopefully this has been useful in in stepping up through.

Awesome.

Thanks Rich.

Thanks guys.